The appearance of new donor states like China and other BRIC-countries as donors has led to the increased donor competition in the developing countries. In fragile and conflict-prone states, competition between old and new donors has undermined Canada’s traditional ways of promoting good governance. For example, the entry of China as a donor to Sri Lanka has completely sidelined Canada and other Western donors as major contributors.
This Briefing Note analyses the reasons why promoting democracy has failed in the context of donor competition and outlines possible options for policymaking It provides several recommendations for abandoning current practices of Western good governance promotion and advises to re-frame it as an economic argument instead.
Should Canada be promoting democracy in the fragile countries? As Canada has experienced with Tamil refugees from Sri Lanka - fragile states can be an overwhelming source of the world’s refugees and internally displaced peoples. Because Canada hosts the largest Sri Lankan diaspora in the world, it is the natural destination for these refugees. Processing the claims of one boatful of Tamil refugees costs Canada approximately $25 million.
Moreover, conflicts resulting from human rights abuses in those countries can spill over to neighboring countries, likely to demand action under ‘responsibility to protect’ clause, which again is a costly endeavor. Therefore, continued work in fragile states is important despite their relative geographical distance from Canada’s shores: depending on the country’s socio-political characteristics, the problems stemming from these regions can have an indirect cost to Canada like mentioned above.
In belief that democracy and respect for human rights will prevent (armed) conflicts from happening, Western development assistance to those regions has been linked to good governance conditionalities over many decades.
In addition to fostering peace, good governance was viewed as one of the keys to poverty reduction and development success. However, according to new development- and state-building theories, the practice of tying aid funds to good governance conditionalities is no longer advisable. Several reasons for abandoning this conduct are listed below.
that in post-conflict countries institutionalism should come before liberalization. He also claims that “authoritarian solutions for war-shattered states should not be rejected out of hand”
India concentrates on non-monetary aid mainly in the form of technical assistance and scholarships, while China offers a wider range of monetary and non-monetary aid packages, which include grants and loans for infrastructure, plant, and equipment, as well as scholarships, training opportunities, and technical assistance. Chinese monetary aid is tied to the use of Chinese goods and services, and requires adherence to the ‘One China’ policy, but does not carry the ‘good governance’ conditionalities that currently characterize Western donors.
First of all, according to developmentalist theory, the development activities (like governance projects promoting democracy), which are directed from abroad, are not going to be sustainable. According to this theory, the roles in the developing field would ideally be in the following way: the agency for change would stem from within the developing state. Western development agencies should in this view be mere “brokers and facilitators” of development. They should be supportive of the local processes, while increasingly developing patience and tolerance of risk in doing so. Therefore, developmentalist theory seeks to ‘emphasize local agency in the sense of people's capacity to effect social change
[1]’. This means that in development projects and in governance issues, in particular, the Western donors should let the recipient country to “sit on the driver’s seat” of its own development. This includes letting the countries choose the type of governance, which suits them the best.
Critical international political economy theory echoes the developmentalist approach to both development and state building, as “it is possible to view state-building as a sub-set of development”
[2]. This theory also urges Western states to be more supportive of endogenous or internally driven state building as the studies show that it is almost impossible for a developing country to “own” externally driven processes
[3]. This means that countries, which culture is very distinct from the Western societies, are not going to be successful planting foreign governance models in their societies. It has been warned that in case “local ownership… become(s) an empty slogan” it will have “devastating consequences.”
[4]
One example of devastating consequences of externally promoted governance projects is Rwanda: in the early 1990s, the Western attempts to liberalize the Rwandan economy, media and the political scene by promoting political liberalization through the Arusha Accords, failed. It has been even argued that indirectly, the internationally led plan to reconcile the warring parties through democratization “served as a catalyst for the genocide”
[5]. Western attempts to foster peace and stability in Rwanda ultimately backfired and efforts for media liberalization gave voice to extremist groups to organizing and conveying inflammatory messages (instead of promoting democracy, as it was hoped to achieve)
[6].
The ruling elite was not willing or able to “own” the processes prescribed in Arusha Accords: “power sharing, political liberalization, establishing democratic elections and forming a coalition government”
[7]. Instead, it seemed easier for the ruling Hutus to end 'the Tutsi-problem' for once and for all, killing almost 80 percent of the Tutsi population.
Before promoting democracy, it needs to be evaluated what conditions are required for permanent democratic turn-around and what opportunities the fragile countries realistically have. Paul Collier has conditioned the turnaround of a failed state to three characteristics of the country
[8]: its level of income, its level of democratic rights, and the proportion of its population with secondary education. This leads to the question: which should come first – education and wealth or democracy? Is it possible for democracy “to be owned” in a country of low levels of education and income?
Fabrice Murtin and Romain Wacziarg who study democratic transitions find
[9] that “primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions”. Therefore, they claim that higher levels of education and higher income lead to democracy and not vice versa. “We find little evidence of causality running the other way, from democracy to income or education,” they say.
In addition to recent theories recommending to abandon the good governance conditionalities in development projects – as of 2005, two OECD documents have turned the theoretical principles listed above into normative guidelines. OECD’s Paris Declaration on Aid Effectiveness, which defines the aid-related conduct of OECD donors, for example, has five principles for its members (including Canada):
“It is now the norm for aid recipients to forge their own national development strategies with their parliaments and electorates (ownership); for donors to support these strategies (alignment) and work to streamline their efforts in-country (harmonization); for development policies to be directed to achieving clear goals and for progress towards these goals to be monitored (results); and for donors and recipients alike to be jointly responsible for achieving these goals (mutual accountability).”
[11]
Both the Paris Declaration on Aid Effectiveness and even A New Deal for Engagement in the Fragile States mandate the donors to align behind locally initiated development agenda, and not to set their own demands to the development.
Canada, as a signatory and enforcer of those documents, has agreed to follow these norms. Clearly, setting aid conditionalities regards to democratization is no longer feasible under the conditions of these declarations. This implies that other means should be found for promoting democracy.
The need to find other ways to deliver aid while promoting democracy in developing (and/or fragile) countries has become even more apparent with the entry of new donors to the developing scene. The rise of BRICs, other G-20 and OPEC countries as donors has introduced competitive elements to the development field, previously dominated by traditional donors and OECD members alone.
Assessing the impact of aid from China and India on the African development it has been found
[12] that despite India and China’s different patterns of aid, the analysis shows clearly that the potential impact of Chinese and Indian aid on Africa is significant.
Therefore, the major difference between the old donors and (re-)emerging donors like China lies in their different attitude towards local governance. As a non-member of OECD, China does not have to follow the rules and norms set for the traditional OECD donors. The donors from BRIC countries are not taking part in any aid-related work led by OECD and traditional donors – in fact, they have insisted that their participation in the aid monitoring framework should be voluntary. Brazil, for example, has even insisted that South-South co-operation should be judged by different criteria than North-South co-operation. Moreover, instead of presenting itself as a donor, China’s aid principles are written from the perspective of an equal partner to the developing countries.
The fact that China does not set policy conditions on the recipient countries makes them increasingly attractive for the non-democratic governments in fragile countries. The words of Sri Lankan Minister of Foreign Affairs illustrate their preference to co-operate with China eloquently: “they don’t go around teaching others how to behave
[13]”. That explains China’s ‘competitive edge’ over traditional donors. This means that doing business with the Chinese does not force the local governments in conflict-prone and fragile countries to choose between continuing their bad policies or securing an attractive infrastructure investment through aid funds. With the Chinese, they can have both.
The bottom line explaining the failures to promote good governance in developing countries and in fragile states, in particular, is that good governance is not viewed as a means to their ultimate goal of economic development. They do not see how could democracy help achieve poverty alleviation and boost increase in incomes. Therefore, to be more successful in the promotion of democracy, it would be a good idea to frame it as an economic argument.
The most traditional foreign policy option would be to urge China to follow the OECD rules of aid delivery. However, it cannot be considered feasible. As a non-member of the OECD, the Chinese do not follow the same rules of aid delivery as the OECD donors. Furthermore, their understanding of aid differs significantly from the traditional donors. China is a very significant source of finance to the developing countries – but only a small portion of this is actually ‘aid’ as understood by traditional donors. The Chinese have not distinguished aid from other financial flows (like FDI, loans, and trade) to developing countries and they do not report about their aid spending.
[14] The traditional donors (like Canada) and the new donors (like China) not only follow different rules but also play completely different political economic games in recipient countries. Demanding China to give up its game is likely not going to succeed
[15].
Secondly, there would be a temptation to exit the countries where competition between the traditional and new donors has resulted in a hostile attitude on behalf of recipient governments, like in Sri Lanka. The aid exit may seem wise considering the current budget restrictions at home, but it may prove short-sighted considering possible expenses of likely humanitarian interventions in the future or administering claims of boatfuls of refugees.
Considering carefully the OECD new norms set for aid delivery and the previous outcomes of externally conducted state-building activities, the best option for Canada seems to be to rephrase its good governance rhetoric. Instead of framing democracy as the end in itself, the demands for political liberalization should be portrayed as a tool to achieving economic success. Instead of ‘democratization’ and ‘good governance’, Canada should be using economic vocabulary and discontinue to tie favorable policy change to its aid delivery.
On that note, Canada could borrow the keywords like ‘inclusive institutions’ from economists. Daron Acemoglu and James Robinson
[16] have claimed that inclusive institutions are the key to the lasting economic success. Their argument in Why Nations Fail is the idea that elites, when sufficiently powerful, “will often support economic institutions and policies harmful for the sustained economic growth”
[17]. The countries, which set up ‘extractive institutions’, are set to fail in the long run, as that type of institutions allow only a limited number of people to access the benefits of economic success. Therefore, the governments create conditions where those who are excluded are likely to challenge the rule of the government, making it unlikely to survive. While authors acknowledge that in short term it is possible to achieve ‘extractive growth’, in the long term it becomes impossible to sustain it. Consequently, political changes are needed to the institutions to allow inclusive participation in decision making.
The work of economist and Nobel Prize laureate and intellectual of Bengali heritage Amartya Sen offers other useful keywords for Canada’s development and aid-related rhetoric. Sen’s notion of “capabilities and freedoms
[18]” is likely to be better understood in countries in Global South than Latin-based ‘democratization’. Sen views poverty as a capability-deprivation, which means that poverty in low-income countries could be eliminated if they removed their internal obstacles for free participation in economic activities. This involves removing exclusive barriers of lower castes, women, and ethnic minorities to political and economic participation and decision-making. Again, it can be framed as an economic formula for growth: if the countries exclude 50 percent of their human capital (women) from participating in the labor market and in political decision making, it yields to the smaller outcome of economic activities.
To support those claims, Canada could refer to the empirical evidence, which proves that equal rights indeed lead to the rise in incomes and productivity. Economists Chang-Tai Hsieh, Erik Hurst, Charles Jones and Peter Klenow
[19] argue that as much as 20 percent of the growth in productivity in the United States over the past 50 years can be attributed to expanded opportunities for women and African Americans. Lowering ‘discriminatory barriers’ can be tremendously beneficial to the economy, they claim: greater equality results in better use of available talent, and therefore it leads to increased productivity and wealth.
The old models of setting aid conditionalities regards to achieving democratic governance in fragile countries are no longer viable. As both the Chinese and the governments of fragile countries are foremost concerned about their economic development and reduction of poverty, the change in rhetoric, and consequently, actions is needed. Instead of framing democratization as a ‘tool for greater justice’, and using it as a persuasion for access to aid funds, or presenting it as an end in itself, good governance should be portrayed as an economic argument. That type of change in rhetoric is likely to reduce the frictions between the competing donors, as well.
Of several options listed above, the ones, which use economic vocabulary, can be estimated to be most successful in transmitting the message of the importance of inclusive political participation.
The likelihood of options where China and other non-OECD donors would change their understanding of aid as a result of Western rhetorical pressure is slim. However, there is growing support from developing countries (like Rwanda, who - previously a fragile state itself - has been prominent in pushing for greater transparency and further untying of aid
[20]) to include the BRICs into the OECD-led international framework of aid and development effectiveness. It remains to be wished that developing countries increased their own pressure on South-South co-operation in support of more transparent aid-related activities.
Referring to the empirical evidence of improved productivity and therefore – wealth – could prove most productive in terms of achieving gradual policy change. This – locally initiated gradual transformation towards greater inclusion in political and economic decision making is in accordance with the international norms set for aid delivery, as well. Both Paris Declaration and A New Deal for Engagement in the Fragile States rule out the options where Western donors set policy conditions to local development.
Marje Aksli,
Globalization and International Development
[1] Fritz, V., &; Rocha Menocal, A. (2007). Developmental States in the New Millennium: Concepts and Challenges for a New Aid Agenda. Development Policy Review , 25 (5), 531-552.
[2] Scott, Z. (2007). Literature Review on State-Building. Department for International Development, Governance and Social Development Resource Centre
[3] Narten, J. (2008). Post-Conflict Peacebuilding and Local Ownership: Dynamics of External–Local Interaction in Kosovo under United Nations Administration. Journal of Intervention and Statebuilding, 2 (3).
[4] Scott, Z. (2007). Literature Review on State-Building. Department for International Development, Governance and Social Development Resource Centre
[5] Paris, R. (2004). At War's End; Building Peace After Civil Conflict. Cambridge University Press.
[6] Heathershaw, J., & Lambach, D. (2008). Introduction: Post-Conflict Spaces and Approaches to Statebuilding. Journal of intervention and Statebuilding, 2 (3).
[7] Paris, R. (2004). At War's End; Building Peace After Civil Conflict. Cambridge University Press.
[8] Collier, P. (2007). The Bottom Billion; Why the poorest countries are failing and what can be done about it. Oxford University Press.
[9] Murtin, F., & Warcziarg, R. (2011). The Democratic Transition, NBER Working Paper #17432 / CEPR Working Paper #8599. Retrieved Dec 12, 2011 from http://www.anderson.ucla.edu/faculty_pages/romain.wacziarg/downloads/transition.pdf
[10] Paris, R. (2004). At War's End; Building Peace After Civil Conflict. Cambridge University Press.
[11] OECD. Paris Declaration and Accra Agenda for Action. Retrieved April 3, 2012 from Development Cooperation Directorate: http://www.oecd.org/document/18/0,3746,en_2649_3236398_35401554_1_1_1_1,00.html
[12] McCormick, D. (2008). China & India as Africa’s New Donors: The Impact of Aid on Development. Review of African Political Economy (115), 73-92.
[13] Campbell, I., Wheeler, T., Attree, L., Butler, D. M., & Mariani, B. (2012). China and conflict-affected states, Between principle and pragmatism. SAFERWORLD.
[14] For example, it is estimated that China’s aid to Africa in 2008 was approximately US$1.2 billion. In contrast, the U.S. provided US$ 7.2 billion, the EU $US 6.0 billion, the World Bank US$ 4.1 billion and France US$ 3.4 billion. Ibid.
[15] Prestowitz, C. (2012). China 's not breaking the rules. It's playing a different game. Foreign Policy. http://prestowitz.foreignpolicy.com/posts/2012/02/17/chinas_not_breaking_the_rules_its_playing_a_different_game
[16] Acemoglu, D., & Robinson, J. (2011). Why Nations Fail, The origins of power, prosperity, and poverty.
[17] Acemoglu, D., & Robinson, J. (2012, May 1)
Who Are the Extractive Elites? http://whynationsfail.com/blog/2012/5/1/who-are-the-extractive-elites.html
[18] Sen, A. (1999). Development as Freedom. Oxford University Press.
[19] Hsieh, C.-T., Hurst, E., Jones, C., & Klenow, P. (2012). The Allocation of Talent and U.S. Economic Growth.
[20] Tran, M. (2012, May 23) New aid effectiveness indicators agreed at the post-Busan meeting. The Guardian, accessed in http://www.guardian.co.uk/global-development/2012/may/23/aid-effectiveness-indicators-agreed-busan?CMP=twt_fd
